With COVID-19 restrictions having hit Melbourne harder than any other city in the world, it is no wonder that its residents have come to feel restless. Renters, in particular, have come to discover the impracticability of living in or near the busy city centre. With the rise in prominence of workplaces adopting and sticking with a work from home model, the advantages of being near the CBD continue to dwindle.
Along with this disillusionment with city renting has come steadily rising rates of migration towards regional areas – other cities in Victoria have seen an uptick in renters and homebuyers, including Geelong, Ballarat and Bendigo. With this migration comes a number of new factors worthy of consideration for those with investment properties in metro Melbourne as well as in the greater Melbourne area. Whilst those with properties in Melbourne will have to contend with a more competitive market, those with regional properties are likely to experience an increasing saturation of prospective tenants.
As a result of this changing market, it has now become more imperative than ever before for property owners both within and outside the metro Melbourne area to enlist the services of experienced Melbourne property managers with extensive knowledge of the suburbs or regions they cater to.
Here’s what property owners can expect to hear from their seasoned property managers in the face of this changing climate.
For property owners, the Melbourne market will become competitive while regional centres become saturated
This regional migration will mean that the demand for properties in Melbourne and the inner suburbs is likely to decrease steadily, as per the trend up to now. This will mean that there will be fewer renters looking for rental properties in these areas, and those who own properties will struggle to keep them occupied over multiple leases, or may experience a less consistent rental income on those properties.
As the rate of migration from city centres to regional areas is recorded to have doubled when compared to the pre-pandemic numbers, we’ve already seen the realities that this migration has held on Melbourne’s inner suburbs over the past few years alone. Alongside this, we have already perceived an increase in renters looking for homes in regional Victoria. This will result in fewer vacant properties and an increase in demand in areas outside of the metro Melbourne region.
In Melbourne, take steps to attract renters
As the market becomes competitive in Melbourne, it is important to help your property stand out from the rest by practicing routine maintenance and potentially even renovating or updating the rental property if its fixtures or appliances are growing outdated. During property tours, renters will be able to see quickly when a property will be more trouble than it is worth. Be sure to focus on preventative maintenance – keeping appliances repaired before they break is likely to ensure renter goodwill and will reduce the need to secure new tenants on a regular basis and thus, maximising the amount of time that your rental property is occupied and generating rental income.
Ensure that you also focus on renovations that are actually desirable to potential residents. For instance, property owners may consider having all rooms with built in wardrobes as this will make the property more attractive to potential tenants. Consider how well insulated the house is currently and evaluate climate control capabilities to ensure that your rental property meets minimum standard requirements in your state.
Similarly, property owners will want to ensure that the property is being marketed ahead of when it is set to become vacant – this will help to keep the property consistently occupied and the income from it regular. It also pays to have professional photography for the home when it is being advertised for new tenants.
Finally, it is always advantageous to reduce the turnover rate for your rental property above all else, as a high turnover rate can end up being rather costly. Make sure that you take into account how to keep your current occupants satisfied and secure wherever possible. Do the occupants feel safe and comfortable in your property? If not, then it may be worth investing in security measures or systems to make it a more comfortable place to live. These little steps can help your tenants feel profoundly more comfortable and respected in their lease agreement.
For regional centres, increase prices to take advantage of increased demand
With an increase in demand in your region, one of the first ideas that may spring to your mind is probably to hike the rental price for your property way higher all at once. However, this is generally not the best practice, and your property managers will agree. The best approach to an increased demand is to try to keep your rental prices aligned with the market value of similar properties in your area, which is where property managers with regional knowledge can be an immense asset. It is advisable to consider increasing rent when the vacancy rate in the region is as low as 1-2%, with 3% and above generally leaving more power in the hands of the renters.
When increasing rent in Victoria, it is required that you inform your tenants in writing with a minimum of 60 days of notice. Rent prices may also not be increased in the middle of a fixed-term agreement unless the agreement explicitly states that this may be done. Even with this stipulation, you must wait 12 months between each instance of increasing rent (previously 6 months).
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As populations increase across the greater Melbourne area, Melbournians must continue adapting to whatever their new normal looks like, with working from home setups and other flexible or remote work options leading to a decreasing demand for inner city properties. Even worldwide, such as in America, there has been a trend away from larger city centres in favour of suburban sprawl. Maintaining an awareness that the way we live is currently in flux will naturally help you stay on top of the management of your investment properties over the foreseeable future.
